Oil prices settled lower on Monday, with global benchmark Brent crude leading the decline, amid some uncertainty in the wake of an agreement by the Organization of the Petroleum Exporting Countries to ramp up production that was backed by nonmember Russia.

August West Texas Intermediate crude on the New York Mercantile Exchange
US:CLQ8
gave up an earlier climb to lose 50 cents, or 0.7%, to settle at $68.08 a barrel, returning a small portion of Friday’s 4.6% climb. August Brent crude
UK:LCOQ8
fell 82 cents, or 1.1%, to $74.73 a barrel on the ICE Futures Europe exchange.

The spread between the two benchmarks has narrowed in recent days, with analysts attributed at least part of the better performance in WTI prices on a crude production outage in Canada that is expected to tighten the U.S. market.

The “OPEC meeting ended with the existing deal being left unchanged but the group aiming to reduce over-compliance and to get output back to the originally-intended levels,” said analysts at JBC Energy Research Centre, in a note dated Monday. “But members clearly differ in their interpretation of the deal as the actual wording of the communiqué is not exactly clear enough.”

“Saudi Arabia has essentially argued that those who have spare capacity can now produce more to make up for producers who cannot meet their quota,” they said. “On the other hand, Iran sees such a quota reallocation as a breach of the deal and thus expects the real supply response to be rather small.”

Ministers from OPEC and non-OPEC producers met Saturday and said they agreed “that countries will strive to adhere to the overall conformity level, voluntarily adjusted to 100%,”—meaning that the countries involved in the original production pact will no longer lag behind others in crude production under the output-cut pact.

OPEC and key nonmember producers have been holding back oil output by around 1.8 million barrels a day since the start of 2017 to curb a global supply glut that has been pressing on prices. But bigger cuts from Saudi Arabia have meant compliance has exceeded the planned quotas.

“The move by OPEC is critical in limiting the market’s total level of upside risk, but provides little guarantee that the market won’t still face undersupplied conditions ahead,” said Robbie Fraser, commodity analyst at Schneider Electric.

Most of the additional output to come under the agreement will be produced in Saudi Arabia and Russia, and that flow will likely go primarily to consumers of Brent crude. The production caps helped fuel a sizable price premium between Brent and WTI, said Gnanasekar Thiagarajan, director of Commtrendz Risk Management.

“Price movements over the later hours on Friday and early Monday, however, highlight the confusion over what to expect as a result of the OPEC/non-OPEC maneuver, as well as the emergence of other sizeable market-moving information,” said JBC Energy Research analysts, adding that Brent was also being hit by fresh U.S. threats to ratchet up trade tensions with China.

Given a standoff between the potential for a gradual supply increase of some 1 million barrels a day and bigger downside risk from Venezuela, Libya and Iran over the coming months, JBC said it is likely crude balances will remain tight over the second half of the year. “Absent some sort of sizeable demand issue, this should continue to support Brent prices above $70 per barrel,” the analysts said.

Meanwhile, data out Friday showed the number of active U.S. rigs drilling for oil fell by 1 to 862 this week. That was the first weekly decline since the past week of March, though there was one week in May when the oil-rig count was unchanged.

In other energy products, July gasoline
US:RBN8
fell 0.9% to $2.052 a gallon, while July heating oil
US:HON8
shed 1.2% to $2.10 a gallon.

July natural gas
US:NGN18
gave up nearly 0.8% to $2.923 per million British thermal units.

— Biman Mukherji contributed to this article

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